WASHINGTON–CUNA and numerous state credit union associations have joined with the American Bankers Association and state bank associations in a letter to Congress urging members to oppose the “deeply flawed” Credit Card Competition Act of 2022.
That legislation, from Sens. Roger Marshall (R-KS) and Richard Durbin (D-IL) would give merchants expanded option when it comes to interchange choices for payments.
In the letter, the associations say that the Marshall-Durbin proposal will lead to “fewer options for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions and the disappearance of card rewards programs that families of all income levels use to stretch their budgets," while also "transferring wealth...to a handful of high-volume, highly profitable large merchants."
Will ‘Decimate’ Card Rewards
According to the associations, far from increasing competition in the credit card marketplace, the Marshall-Durbin legislation “will reduce the number of credit card issuers competing for consumers’ business, wring out the competitive differences among card products, decimate card rewards programs (such as airline miles) valued by American families and the tourism sector, and put the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board.”
The groups also expressed concern that the Marshall-Durbin legislation would hand control of the country’s credit card system to what the letter calls “breach-prone merchants.”
Risk-Related Concerns
"The Marshall-Durbin bill purports to provide merchants a choice of which networks credit card transactions are processed across," the letter reads. "But this dual-routing technology does not exist today and for good reason. A credit card transaction is an extension of the bank or credit union’s own funds to its cardholder, who directs those newly lent funds to a merchant. It makes perfect sense that the bank and credit union that lends these funds should carefully and deliberately select the network over which their own funds flow to the merchant. Unlike merchants that specialize in selling groceries or shoes, financial institutions are payments experts responsible for and best positioned to protect their customers against fraud, loss of private data, and the inefficiencies of unreliable systems.
“Financial institutions are also examined for compliance with privacy, data security, and fair lending laws, while merchants are not,” the letter continues.
The bank/credit union trade associations said the proposed bill is as “flawed” as the Durbin Amendment that preceded it a decade ago as part of the Dodd-Frank
The full letter is available here.
Anthony Hernandez
DCUC's Letter
The Defense Credit Union Council (DCUC) wrote to Senate Majority and Minority Leaders expressing its concerns with the legislation.
"Apart from the unfairness of saddling military credit unions with costs for the benefit of giant retailers, it is a terrible idea to have the government take the choice of a payment network away from consumers and give it to big-box retailers," stated DCUC President and CEO Anthony Hernandez. "If consumers lose the ability to choose their network, credit card transactions will likely go over less secure, less reliable networks that do not provide a suite of rewards and protections for consumers."
Hernandez said there are security concerns as retailers would be incentivized to send transactions through the cheapest available route -- not the most secure network.
"Our military members and veterans deserve better! Additionally, the move to the cheapest network possible will deprive defense credit unions of interchange income that they use to keep their basic banking services affordable for members of our armed forces," stated Hernandez.